Accounting for Variability in the Growth Rate of Income
5 Pages Posted: 29 Jul 2014
Date Written: July 24, 2014
The average of periodic growth rates is a downwardly biased estimator of the rate of growth of a country. The higher the variance of the periodical growth rates, the higher the downward bias. The longer the business cycle, the higher the downward bias. In this short paper, we demonstrate these facts on a number of different levels, from intuitive to quite technical. We suggest that the variability of growth rates be taken into account whenever a long term forecast is prepared.
Keywords: growth rate, individual incomes, gross national product
JEL Classification: O47, B41, E37
Suggested Citation: Suggested Citation